Instructions For Form 8606 - Nondeductible Iras

•

Return of Excess

additional 6% tax on excess

Page 1 of Forms 1040 (or Forms

contributions on Form 5329. You

1040A, 1040NR, or 1040-T) filed for

Traditional IRA

include the $5,000 distribution on

each year you made a nondeductible

your 2003 Form 1040, line 15a, enter

contribution to a traditional IRA.

Contributions

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-0- on line 15b, and attach a

Forms 8606 and any supporting

The return (distribution) in 2003 of

statement to your return explaining

statements, attachments, and

excess traditional IRA contributions

the distribution, including the fact that

worksheets for all applicable years.

for years prior to 2003 is not taxable if

•

you filed amended returns for 2001

Forms 5498 or similar statements

all three of the following apply.

and 2002 and paid the additional 6%

you received each year showing

1. The distribution was made after

tax on the excess contributions for

contributions you made to a

the due date, including extensions, of

those years. The statement indicates

traditional IRA or Roth IRA.

•

your tax return for the year for which

that the distribution is not taxable

Forms 5498 or similar statements

the contribution was made (if the

because (a) it was made after the due

you received showing the value of

distribution was made earlier, see

dates of your 2001 and 2002 tax

your traditional IRAs for each year

Return of IRA Contributions on

returns, including extensions, (b) your

you received a distribution.

•

page 4).

total IRA contributions did not exceed

Forms 1099-R or W-2P you

2. The total contributions

$2,000 for 2001 or $3,000 ($3,500 if

received for each year you received a

(excluding rollovers and conversions)

age 50 or older at the end of 2002)

distribution.

to your traditional and SEP IRAs for

for 2002, and (c) you did not take a

Note: Forms 1040-T and W-2P are

the year for which the excess

deduction for the contributions, and

forms that were used in prior years.

contribution was made did not

no deduction was allowable because

exceed:

you did not have any taxable

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$3,000 ($3,500 if age 50 or older

compensation for those years. The

at the end of 2002) for 2002,

statement also indicates that the

Specific Instructions

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$2,000 for years after 1996 and

distribution reduced your excess

before 2002, or

contributions to zero, as reflected on

Name and social security number

•

$2,250 for years before 1997.

your 2003 Form 5329 and it indicates

(SSN). If you file a joint return, enter

If your total IRA contributions for

your adjusted basis in nondeductible

only the name and SSN of the

the year included employer

contributions.

spouse whose information is being

contributions to a SEP IRA, increase

reported on Form 8606. If both you

the $3,000 ($3,500, if applicable),

Amending Form 8606

and your spouse are required to file

$2,000, or $2,250 by the smaller of

Form 8606, file a separate Form 8606

After you file your return, you may

the employer contributions or $40,000

for each of you.

change a nondeductible contribution

($35,000 for 2001, or $30,000 for

to a traditional IRA to a deductible

years before 2001).

Part I—Nondeductible

contribution or vice versa. You also

3. No deduction was allowable

may be able to make a

Contributions to

(without regard to the modified AGI

recharacterization (see page 3). If

limitation) or taken for the excess

Traditional IRAs and

necessary, complete a new Form

contributions.

8606 showing the revised information

Distributions From

Include the total amount distributed

and file it with Form 1040X,

on Form 1040, line 15a; Form 1040A,

Traditional, SEP, and

Amended U.S. Individual Income Tax

line 11a; or Form 1040NR, line 16a;

Return.

SIMPLE IRAs

and attach a statement to your return

explaining the distribution. See the

Penalty for Not Filing

Line 1

example below.

If you are required to file Form 8606

If you used the IRA Deduction

If you meet the above conditions

to report a nondeductible contribution

Worksheet in the Form 1040 or

and are otherwise required to file

to a traditional IRA for 2003 but do

1040A instructions, subtract line 10 of

Form 8606:

not do so, you must pay a $50

•

the worksheet (or the amount you

Do not take into account the

penalty, unless you can show

chose to deduct on Form 1040, line

amount of the withdrawn

reasonable cause.

24, or Form 1040A, line 17, if less)

contributions in figuring line 2 and

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from the smaller of line 8 or line 9 of

Do not include the amount of the

Overstatement Penalty

the worksheet. Enter the result on line

withdrawn contributions on line 7.

1 of Form 8606. You cannot deduct

If you overstate your nondeductible

Example. You are single, you

the amount included on line 1.

contributions, you must pay a $100

retired in 2000, and you had no

penalty, unless you can show

taxable compensation after 2000.

If you used the worksheet

reasonable cause.

However, you made traditional IRA

Figuring Your Reduced IRA

contributions (that you did not deduct)

Deduction for 2003 in Pub. 590,

What Records Must I

of $2,000 in 2001 and $3,000 in

enter on line 1 of Form 8606 any

2002. In November 2003, a tax

nondeductible contributions from the

Keep?

practitioner informed you that you had

appropriate lines of that worksheet.

made excess contributions for those

To verify the nontaxable part of

years because you had no taxable

distributions from your IRAs, including

If you did not have any deductible

compensation. You withdrew the

Roth IRAs, keep a copy of the

contributions, you may make

$5,000 and filed amended returns for

following forms and records until all

nondeductible contributions up to

2001 and 2002 reflecting the

distributions are made.

your contribution limit. Enter on line 1

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Instructions For Form 8606 - Nondeductible Iras - 2003 Page 5

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